US audit finds lack of oversight in ATF probes of cigarette smuggling

Reuters

By Lisa Maria Garza

Sept 25 (Reuters) - Federal agents conducted dozens ofincome-generating tobacco sting operations without approvalduring the last seven years and misplaced more than 2 millioncartons of cigarettes, according to a report released by theU.S. Department of Justice on Wednesday.

Inspector General Michael Horowitz criticized the Bureau ofAlcohol, Tobacco, Firearms and Explosives (ATF) in the reportfor "a serious lack of oversight", citing 35 "churning"investigations that were not reviewed by the agency's UndercoverReview Committee for prior approval.

The committee did not meet between February 2005 and January2012, the report said, although it did not give an explanationfor the lack of meetings.

Despite the lack of required prior approval, churninginvestigations are allowed under statutory authority, accordingto the report, and are conducted to generate funding fromillegal transactions to pay for expenses incurred during theinvestigations.

More than 2.1 million cartons, containing 420 millioncigarettes, purchased during at least 20 separate ATF stingoperations, are missing, according to the audit. The estimatedretail value of the cigarettes is $127 million, according to thereport.

"The OIG report inaccurately implies ATF cannot account for2.1 million cartons of cigarettes or that the cigarettes aremissing," Colbrun said in an email.

The ATF did a reconstructive inventory that showed 447,218cartons were not accounted for because of "insufficientdocumentation," Colbrun said.

The black market value, which the cigarettes were sold atduring the sting operations, is estimated at $7.2 million,according to the ATF.

Colbrun did not directly address the report's conclusionthat the investigations were carried out without prior approval,but she said a new policy would require churning investigationsto be approved by a team of management officials, including aJustice Department official and the U.S. Attorney's Office.

The inspector general identified one unapprovedinvestigation that allegedly allowed a tobacco distributorworking for ATF as a confidential informant to pocket more than$4.9 million in profits from cigarette sales to criminalsuspects without submitting an expense report.

ATF officials explained that the money was necessary tocover the informant's expenses, the report said.

"Churning has been and continues to be an effective tool forATF in combating the illicit trade in tobacco products with asignificant impact on violent crime," Colbrun said.

The ATF has been under significant scrutiny after U.S.Border Patrol agent Brian Terry was killed in a shootout in theArizona borderlands in December 2010.

His death was linked to an ATF sting operation dubbed "Fastand Furious," which allowed weapons to slip across the border toMexico.

A number of guns bought in the scheme were later recoveredfrom crime scenes in Mexico. Two tracked by the ATF were alsoretrieved from a remote spot in southern Arizona where Terry waskilled in a shoot-out with suspected bandits.